Recap Flashcards
How does cash flow indicate profitability?
Cash flow shows the actual cash generated or used, indicating the ability to sustain operations and reinvest in the business.
Profitability can be assessed by comparing cash inflow to cash outflow.
How does cash flow relate to net operating income (NOI)?
Cash flow provides a more comprehensive view of financial health than NOI, as it accounts for cash movements and expenses not reflected in NOI.
NOI does not consider capital expenditures or financing costs.
What information is contained in a cash budget?
A cash budget includes projected cash inflows and outflows, timing of cash receipts, and cash requirements for the period.
It is essential for ensuring liquidity.
How does a cash budget differ from an operating budget and a long-range budget?
A cash budget focuses on cash flow while an operating budget outlines expected revenues and expenses, and a long-range budget plans for future financial activities over several periods.
Operating budgets often include non-cash expenses.
What are some practical ways of monitoring, controlling, and trimming cash inflows and outlays?
Some ways include regular cash flow analysis, setting spending limits, and implementing cash management strategies.
Techniques like forecasting can also help in managing cash flow.
What are some of the ways to track and analyze trends in cash, income, and expenses?
Ways include using financial software, preparing cash flow statements, and comparing historical data.
Trend analysis can help identify patterns and forecast future performance.
How does IRR relate to cash flow?
IRR (Internal Rate of Return) is a metric used to evaluate the profitability of investments based on projected cash flows.
It indicates the rate at which the net present value of cash flows equals zero.
What is the purpose of calculating cash-on-cash return?
Cash-on-cash return measures the cash income earned on the cash invested in a property or investment.
It helps investors assess the profitability of their investments.
